By Bernd Debusmann Jr
Covid-19 may change passenger travel forever, as the aviation sector faces the bleakest period in its history
IATA – the International Air Transport Association – predicts that 670 carriers around the world will go bust in just a few months if they are not provided with $200bn in state support to help them survive, leaving only 30 airlines for travellers to choose from; not that they will complain.
And how could they protest if the economic effect of the coronavirus is expected to be at least 10 times worse than the chilling aftermath of the September 11 attacks?
If they thought 2001-2006 was aviation’s darkest year, they need to be better acquainted with Covid-19.
While 9/11 reduced travel demand by more than 31 percent in the five months following the attacks, reducing revenues from domestic US flights to $10bn, the coronavirus has led to a 41 percent tumble in travel in the Asia-Pacific region in February alone. The total forecast loss for airlines worldwide this year? A staggering $252bn, or 44 percent of last year’s total; and that’s just based on a three-month lockdown period.
“There is a concern that passengers will refrain from undertaking any travel for fear of sitting next to somebody that could or may have a potential illness”
“The history of the airline business has never seen anything like this,” a shaken Muhammed Ali Albakri, tells reporters through the grainy screen of a video conference call. “The industry is going through one of its darkest moments of history,” says the regional vice president of the IATA.
In the Middle East’s aviation sector, Albakri’s grim assessment is mirrored in photographs that show nearly 10,000 passenger aircraft sitting idly on runways and in storage hangers. The once buzzing travel hub, Dubai International Airport, stands eerily quiet, its prized Dubai Duty Free stripped of any customers, and activity limited only to cargo operations. In the UAE, Emirates and Etihad – two of the globe’s most recognised brands - have stopped passenger flights altogether, with the exception of occasional repatriation flights for expats desperate to return home, as well as flights for Emiratis stranded abroad.
It doesn’t get any better. IATA’s latest figures show revenue losses for Middle Eastern carriers are expected to mount to $19bn this year – more than double a previous assessment of $7.2bn made on March 11. In the UAE alone, the impact of the coronavirus could lead to 23.8 million fewer passengers for the country’s airlines, resulting in $5.36bn in lost revenue. That’s to say nothing of the risks to 287,863 jobs and a $17.7bn contribution to the UAE’s economy.
The worst is perhaps yet to come.
“I don’t think we’re anywhere near the bottom of this yet. There’s still a long way to go on this downward trajectory,” says Saj Ahmad, the chief analyst at London-based StrategicAero Research. “We’re in uncharted territory right now and it will be a very long and painful slow path back.”
“Airline business has never seen anything like this. It is going through one of its darkest moments of history”
The question airlines are asking themselves is what the beginning of that path will look like. The IATA believes it starts with government support: loans, loan guarantees, tax relief and the backing of the corporate bond market. “Governments must recognise the vital importance of the air transport industry, and that support is urgently needed,” Albakri explains. “Failure to act will make the crisis longer and more painful.”
Among governments that are already heeding that call is Dubai, where Crown Prince Sheikh Hamdan Bin Rashid Al Maktoum vowed that the government will inject liquidity into Emirates. Although details have not yet been revealed, Ahmad says the plan will help bolster the airline in the event that it burns through a significant chunk of its currently healthy cash balance of $6bn. But not every airline is as lucky.
“Obviously that $6bn won’t last forever… it’s more of a supporting mechanism. But some [regional] airlines aren’t as fortunate to have a bank balance that is healthy,” he says. “What applies to one does not apply equitably to another. The dynamics between how a government decides who is worth saving and who isn’t will be a discussion that unfolds over the next few months. “
A few, however, have shown great optimism, and have speculated that the subsequent travel period will be one for the record books as people step out of quarantine with a sense of wanderlust and itchy feet. In March, for example, Cleartrip’s marketing director Matthew Sliedrecht said “we may see this Eid as one of the largest travel seasons in history.”
“These figures that IATA has put out will look very ridiculous in the grand scheme of things”
But his buoyant views have largely been dashed by the brutal realities of the coronavirus pandemic. Now, industry insiders are warning that the flow of travellers may restart as a mere trickle given varied national timelines for lifting restrictions and a general sense of uncertainty that will continue to swirl for months to come.
“The key to international travel taking off again is what happens in each country, and the answer to that will vary from country to country and from region to region while countries and airlines figure out how to safely move people,” says Ross Veitch, the co-founder and CEO of Dubai and Singapore-based online travel marketplace Wego.
“I think there will be a lot of pent-up demand and I would like to say I’m expecting a big ‘V’ shaped recovery, but I think it will be a bit slower.”
While Veitch believes domestic travel will be the order of the day in the short-term, the Arabian Gulf will most likely be where the travel will begin first.
“For countries where the spread is relatively well contained, I think we’ll see airlines beginning to fly and move between those countries,” he says. “Fortunately, the GCC nations are doing a pretty good job of keeping the spread under control so far. Some of those travel restrictions will be lifted – at least between the GCC states.”
“The GCC nations are doing a pretty good job of keeping the spread under control so far”
Yet the lifting of travel restrictions does not necessarily mean there will be a sudden spike in demand for air travel. According to Saj Ahmad, widespread public concerns about the health risks associated with air travel in the wake of the Covid-19 pandemic mean predictions of the ‘mother of all travel periods’ to and from the UAE and the Middle East may be premature.
“There is a concern that passengers will refrain from undertaking any travel for fear of sitting next to somebody that could or may have a potential illness. That’s really going to dent demand,” he adds. “It’s unprecedented, and I don’t see that situation changing, regardless of what airlines put in place in terms of pricing. It will be incremental growth at a slow pace and will be unlike anything we’ve ever seen, even after 9/11, and a lot of it will hinge on passenger fear.”
Once we do take to the skies again, it’s a given that the experience will be unlike that which we knew even earlier this year. At least for the foreseeable future, the same medical concerns that may make many people reluctant to fly will take centre stage at airports. It wouldn’t be the first time. After all, past experiences with terrorist attacks or attempted attacks is what led to the security procedures that we all take for granted today.
That’s already begun. In the weeks before global passenger travel ground to a standstill, cabin crew and airport staff were thrust into unlikely positions as frontline staff in the battle against Covid-19, exposing themselves to potentially coronavirus-positive passengers in the course of their duties. The IATA went as far as to formally recommend that cabin crew set aside ‘quarantine’ areas at the back of aircraft and check the temperature of passengers on flights longer than four hours.
“Failure to act will make the crisis longer and more painful”
Aviation experts believe that, for now, passengers will have to provide proof they are Covid-19 negative before they can check in, pass immigration and head towards a plane.
“In the short and medium-term, we’ll see thermal and medical screening [at airports] and maybe even documentation checks,” Dubai-based aviation analyst and blogger Sam Chui tells us from Las Vegas, where he finds himself stuck amid the pandemic.
“We have seen some countries impose the rule that you must have a doctor’s paper to travel. I don’t think this will be a permanent feature, but nobody knows how long the virus will last.”
Charlie Leocha, the head of the US-based advocacy group Travellers United, believes the role airlines played in spreading the coronavirus from China to other parts of the globe will leave a lasting impact on aviation.
“I don’t think we’re anywhere near the bottom of this yet”
“Airlines are the reason that this spread so quickly. It’s the only way the virus could have done that. In the new interconnected world that we have, we have to take consumers more into consideration. The airlines can’t treat us as self-loading cargo. They need to at least treat us as ‘inspected’ self-loading cargo,” he says.
“[Coronavirus] is also going to change the ways we cross borders. In the past to go some places, we needed a collection of immunizations, and that will become more important in the future. I also think masks will become a mandated thing for crew, who interact with lots of people. Even at 20 percent capacity, that’s still like 50 people. They need protection.”
However, for passengers, the pandemic may end up having a silver lining: airlines will probably have to offer enticing deals, stellar customer service and health-focused operating practices – such as perhaps leaving middle seats off limits to passengers – to attract passengers to fly again and they work to re-boost their numbers.
“Eventually we’ll get back to where we were, and we’ll have a proliferation of low-cost airlines selling dirt cheap tickets, and we’ll have long-haul airlines doing what they’ve done before with opulent services and offerings. Going forward, there will be a lot of competition between airlines that have been granted permission to re-instate services between city pairs that have since been cancelled,” Ahmad explains.
“We’re in uncharted territory right now and it will be a very long and painful slow path back”
“There will also be a health-conscious approach that customers will take. They’ll want to know what airlines are doing to have more spacing, and what airlines are applying health rules liberally or strictly. The days of ‘rack ‘em, pack ‘em and stack ‘em’ will be secondary for airlines because of health-related rules.”
For passengers, the changes will only be immediately noticeable when airlines begin transporting people again. It isn’t likely to happen soon, as experts warn that the colossal regional losses being regularly tallied by IATA will continue to mount. For some, even government aid will not save them.
“It will help to a certain degree, but the reality is that it may not be enough,” Ahmad says plainly. “Whatever IATA is talking about in terms of hundreds of billions of dollars [needed to help], to be honest it may run into tens of trillions, because you’ve got to factor in the supply chain of hotels, leisure centres and others that rely on aviation as a catalyst for their own industries.”
“I really don’t see that we’ve reached the bottom of this yet,” he adds. “Eventually these figures that IATA has put out will look very ridiculous in the grand scheme of things.”
With an uncertain future, airlines must buckle up and brace for inevitable impact.
In late March, Emirates received approval to begin flying a ‘limited’ number of passenger flights from Monday, April 6.
The flights – which will operate from DXB’s Terminal 2 until further notice – will initially fly to London Heathrow, Frankfurt, Paris, Brussels and Zurich, with 4 flights a week to London and 3 flights a week to the other cities. The flights will only carry outbound passengers from the UAE, and belly-hold cargo in both directions. Adel Al Rida, the executive director of operations at Emirates, told Al Arabiya that some flights to the United States could also be added soon.
In early April, Etihad announced that it will be the first airline to test a new Australian-designed self-service device that can help identify travellers with medical conditions, including the early stages of Covid-19.
The new contactless devices – designed by Elenium Automation – will monitor temperature, heart rate and respiratory rate. The initial trial will be carried out at Abu Dhabi International Airport from the end of April and throughout May. The airport has taken the necessary steps to be prepared for every possible scenario to protect passengers and staff.
According to IATA, the 9/11 attacks saw travel demand fall by 31 percent in the five months following the attacks. In the US alone, airline revenue fell by $10bn a year between 2001 and 2006.
Despite the losses at the time, current US Treasury Secretary Steven Mnuchin has said that “this is worse than 9/11 for the airline industry. They are ground to a halt.”For all the latest Transport news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.